The Cabinet decided today that Israel would continue to observe the 48-hour cease-fire in Beirut requested by U.S. special envoy Philip Habib although it expired at noon today. According to a Cabinet statement, Israeli troops will not fire unless fired upon.

The decision followed conflicting reports on Habib’s progress, or lack of it, in trying to get the Palestine Liberation Organization to lay down its arms in Beirut and pave the way for the establishment of a central Lebanese authority. Sources here said earlier in the day that the American diplomat had not even reached “the beginning of a settlement.”

But later reports from Beirut spoke of progress toward the creation of a National Salvation Council which would extend Lebanese authority to west Beirut presently under PLO control. Those reports apparently were related to Walid Junblatt’s reported decision to participate in a National Salvation Council. Junnblatt, a leftist who heads Lebanon’s large Druze community, is a key political figure. He reportedly promised Habib a decision by Monday.

The Cabinet indicated that Israeli forces in Lebanon would observe the truce at least until the outcome of Premier Menachem Begin’s meeting with President Reagan at the White House tomorrow. Begin met with Secretary of State Alexander Haig in New York Friday.

U.S. READY TO PRESSURE SYRIA

According to reports reaching here, Haig repeated the American request that Begin keep Israeli troops out of west Beirut. He reportedly expressed U.S. readiness to exert its influence for a gradual withdrawal of Syrian forces from Lebanon, although probably not from the Beka Valley in eastern Lebanon which controls the approaches to Syria.

Haig is also said to have told Begin that the U.S. would not encourage further action against the PLO if the PLO completely abandoned its military role and become purely a political organization. Begin, for his part, reportedly claimed that the Palestinians were preparing to resume fighting in Lebanon.

He said a PLO presence in the town of Alei, east of Beirut, has been re-enforced by large numbers of volunteers, including Iranians and Jordanians, with the apparent intention of trying to link up with the PLO forces in west Beirut.

Sources here meanwhile claimed there was little chance that the PLO would voluntarily dismantle its military infrastructure and hand over its weapons to the Lebanese army.

At today’s Cabinet meeting, Deputy Premier Simcha Ehrlich flatly rejected a reported proposal by Habib that PLO chief Yasir Arafat form a Palestinian government in exile in Cairo which would participate in the autonomy negotiations. Ehrlich said he had no confirmation that Habib had ever proposed such a move but if the reports were correct, Israel would never under any circumstances negotiate with Arafat.